In a comprehensive discussion, Will Quist, Partner at Slow Ventures, reflects on the venture capital landscape, sharing insights on the firm's investment philosophy and his journey from a professional water polo player to a VC. Slow Ventures, known for backing companies like Robinhood and Nextdoor, emphasizes the importance of non-consensus investing and the nuanced art of venture capital, which Quist compares to "elk hunting" – a process requiring patience and precision. The conversation also touches on the evolving nature of venture capital, with Quist critiquing the shift towards a less collaborative, more competitive environment, particularly in later-stage investments. He advocates for a balance between classic venture craftsmanship and strategic collaboration, drawing parallels to firms like Sequoia for their successful approach to business and venture. Additionally, Quist discusses the significance of branding for startups, the challenges of secondary market timing, and the role of LP incentives in shaping the industry's future.
"And so I'm thrilled to make that happen today with our welcoming will quist, partner at Slow Ventures to the hot seat now, over the last decade, the team at Slow Ventures have invested in the earliest rounds of over 500 companies, including Robinhood, Nextdoor, airtable, Salana and many more."
This quote introduces Will Quist and highlights the significant impact Slow Ventures has had on the startup ecosystem through their investments.
"Harvard Management Company is constantly seeking out the next generation of great investors and entrepreneurs."
This quote emphasizes HMC's role in nurturing new talent in the investment and entrepreneurial space.
"Mercury is building full stack banking for startups. Apply in under ten minutes from anywhere for FDIC insured bank accounts, physical and virtual debit cards, domestic and international wires and integrations with gusto, stripe, QuickBooks, plaid, basically every other tool your startup uses."
This quote outlines the comprehensive banking services offered by Mercury to startups.
"I ended up being heavily involved with thousands of submissions, having to review probably 1000 companies. I met with four or 500 companies in person over six months."
This quote details Will's hands-on experience with startups and how it shaped his understanding of venture capital.
"I jumped on there, grew that to a couple of billion of Aum, and it was ended being the best thing that could happen in my career."
This quote reflects on the valuable experience and growth Will achieved while at Industry Ventures.
"95% of venture capital isn't actually venture capital."
This provocative statement by Will Quist suggests that the majority of what is labeled as venture capital today does not align with the original intent of the industry.
"The equation is simple, but understanding how to balance those factors and when to make a bet is hard."
This quote encapsulates the complexity of venture capital decision-making despite the seemingly straightforward nature of the investment process.
"I think there's always been a lack of rebels."
This quote reflects on the rarity of unconventional thinkers in the venture capital space and the industry's tendency toward conformity.## Denigration of Returns in Venture
"Do we see the denigration of returns in venture?" "Does new venture not actually disable or disarm old venture or venture classic?"
"I think there's a real incentive when you're operating at scale to not back novelty." "The only big multi-stage fund that does care and honor it really well is Sequoia."
"They're option bets for them." "Do they worry about them going wrong? Nah, they're seed."
"Does the questioning and underwriting process change when being a click further out from consensus?" "You ask the same questions. The nuance is what answers make you most comfortable in pricing it over the rest of the market."
"My immediate reaction is, I think you failed to create a product that has such easily identifiable value proposition." "Are there some black swan things that can wipe out every investment? The answer is yes."
"How do you think about the risk matrix and the framework with which you apply risk to each investment decision?" "There's a point at which you're backing too many theoreticals and you can't put a price on it."
"Is your loss rate not higher, given it's one click away and it's less consensus, less down the fairway?" "You need more aggregate optionality."
"When you look out at venture over the next like three to five years, how do you think it looks then?" "They all end up looking alike."
These quotes speculate on the future of the venture capital industry and whether firms will converge in their strategies and appearances.## Venture Capital Market Dynamics
The venture capital market is experiencing changes similar to those seen in investment banking and private equity.
Firms that have specialized and adapted early to these changes are expected to succeed.
Those slow to adapt will struggle to find their place and gain competitive advantage.
A large middle group of firms may find it difficult to find edge and alpha in the market.
Massive shifts in the market can temporarily level the playing field, allowing various players to succeed.
"I think the pie gets bigger, but unfortunately it subsists less people." This quote implies that while the overall market for venture capital is growing, the number of players who can successfully operate within it is shrinking.
"You'll see firms that have picked a quadrant and set up their organization and strategy work really well." This quote suggests that firms which specialize and strategically position themselves in a particular sector of the market are likely to perform well.
"Everything in venture is always capital by like when there's a massive shift, it creates so much margin for everyone that all bets are off for a little while and everyone can continue to play." This quote indicates that significant market shifts can create opportunities for many players, but this is usually a temporary situation.
"The other hard thing is it takes a while to die in venture." This quote acknowledges the prolonged nature of success or failure in venture capital, making it hard to quickly determine a firm's viability.
"This is the first time we're really seeing a zero sum type behavior in people that can absorb LP dollars in such mass." This quote highlights a new trend where venture capital firms are competing more aggressively for limited partner investments, leading to a winner-takes-all scenario.
"Mostly it's salary and bonus. If that's the case, you would absolutely give money to you name your large multistage fund with accredited brand, even though you know it's a 1.6 to 1.8 x." This quote reflects on the conservative incentive structure for LPs, leading them to invest in larger, more established funds with moderate returns.
"On a $6 billion fund expecting 30% to 40% net IRRs isn't reasonable." This quote indicates that for large funds, LPs have realistic expectations of returns and are not aiming for excessively high Internal Rates of Return (IRR).
"The transition to competing to win deals versus underwriting there became a real premium on, hey, this is something everyone likes." This quote describes the shift in focus from careful deal analysis to competing for popular deals that attract widespread interest.
"New venture is less collaborative than ever, and the incentive structure is to be less collaborative." This quote suggests that the venture capital industry is moving towards less collaboration among firms, driven by changes in incentive structures.
"The only time pricing really screws you up is when you stay disciplined and miss a dramatic winner." This quote reflects on the dilemma of price discipline potentially leading to missed opportunities with high returns.
"Maybe you got price wrong, but what you really got wrong was allocation." This quote emphasizes the importance of capital allocation over precise pricing in the context of managing a venture portfolio.
"The learning was to not come to sweeping conclusions, to sift through the business and think through the problem they were proposing solving." This quote emphasizes the importance of thorough analysis and avoiding broad generalizations when evaluating potential investments.
"I don't think enough venture investors think of themselves as an investor first and then venture second." This quote suggests that venture investors should prioritize fundamental investment principles over the perceived uniqueness of the venture capital industry.
"This is the hard takeaway about price, right? Which is like it matters till it doesn't." This quote highlights the paradox of price sensitivity in venture capital, where it can be crucial or irrelevant depending on the situation.
"The lens I use the most to try to figure out what part of the organization is in special forces mode and what parts in infantry." This quote introduces the analogy of military roles to describe different functions within a company, which can inform investment and management strategies.
"I'm not sure it's ever healthy to be in hold mode." This quote challenges the traditional approach of holding investments long-term, advocating for a more active stance on buying or selling.
"How do you think about reserves? I think reserves are going to be very different moving forwards." This quote indicates that the strategy around reserves, or additional capital set aside for follow-on investments, is evolving and will be a critical consideration for venture capital firms.## Opportunity Cost and Managerial Perspective
"Yeah, but this goes down to what's your opportunity cost, right. If you have limited partners. Right. Who are support, this goes to your cost of a bullet. Right."
This quote emphasizes the importance of considering opportunity costs when investing other people's money (limited partners) and metaphorically compares investment opportunities to bullets, where one must decide when and where to invest based on potential returns.
"You're almost always better off accumulating stock in those companies over the first eight years of their life than you are in any diversified venture portfolio."
This quote suggests that investing in select high-quality companies early in their lifecycle is often a more successful strategy than spreading investments across a broad venture portfolio.
"Sequoia? Not even."
This quote is a succinct expression of Will Quist's utmost admiration for Sequoia, indicating that it stands out as a leading firm without question.
"I think it's a top two or three investment management firm in the world and one of the most well run businesses that I can see."
This quote elaborates on the high esteem in which Sequoia is held, ranking it among the best in the world for both investment management and overall business operations.
"I always think, like, success in ventures cyclical. Do you agree with, like, you know, great firm gets great company, which leads to more great entrepreneurs wanting great company."
This quote introduces the idea of a cyclical pattern in venture success, where the achievements of a firm reinforce and perpetuate further success by attracting top-tier entrepreneurial talent.
"And it was clear from that get go that they looked at it, they looked at this as a product and a business."
This quote reflects on the early realization by Sequoia's Don Valentine that venture capital should be approached with the same strategic and business-oriented mindset as any other product or service.
"No. I mean, early on I think we would have said multistage. I think the amount of human capital and what it means on a daily basis to be a competitive multistage firm is not what we do."
This quote clarifies that Slow does not intend to pursue a multistage investment strategy, as it does not align with the firm's strengths or operational style.
"I often look to Allen and co. As someone who's done that really well."
This quote points to Allen & Co. as an example of a firm that successfully combines classic venture practices with a collaborative model, something Will Quist is interested in exploring for Slow.
"I've changed my mind that branding is more important than I thought it was."
This quote signifies a change in Will Quist's opinion, acknowledging that branding plays a more significant role in a startup's success than he previously believed.
"I mean, anyone outperforming. I mean, I think sequoia does great, Andreessen does great, benchmark in their own way does great, founders Fund does great."
This quote lists several venture capital firms that Will Quist believes excel in branding, contributing to their success and outperformance in the industry.
"What got me to a yes was a guy delivering value, executing in the markets, who had several s curves that I thought were pretty logical ahead of him."
This quote explains the rationale behind the investment in Fair Square Medicare, emphasizing the founder's performance and the company's promising growth trajectory.
"Yeah, man, this was really fun. Like coming on your show teaches you a lot about what you think."
This quote highlights the reflective nature of the podcast conversation, suggesting that such discussions can help clarify and deepen one's understanding of their own perspectives.